Governance

Governance in Asia: From Crisis to Opportunity

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Reprinted from the Asian Development Bank Annual Report 1998. 22 pages. Office of External Relations.

At the core of our dark experience lies the ugly truth that ther was an absence of transparency, accountability, public interest, and public responsibility.¹

Issues of governance are at the center of many of the most pressing challenges confronting countries throughout the Asian and Pacific region today. In East² and Southeast Asia³, the need for greater transparency and accountability in regulating the financial sector has been one of the key problems behind the currency turmoil, corporate bankruptcies, and falling stock markets that have plagued the region since July 1997. In South Asia⁴, issues of restricting the reach of state intervention and improving the delivery of basic services, such as health care and education, are high on the agenda. Economies in transition in Central⁵ and Southeast Asia are grappling with redefining the role of the state, shifting the balance between central and local power, and providing civil service employees with appropriate skills for managing a market economy. In the Pacific⁶, issues of public sector efficiency, effectiveness, and accountability are particularly important for ensuring the long-term viability of small economies.

Each nation's path to good governance is different, depending on culture, geography, political and administrative traditions, economic conditions, and many other factors. The scope of activities allocated to the public and private sectors diverges markedly. Variation in scale is also enormous. Many of the institutions and practices that work effectively in the People's Republic of China (PRC), with its 1.2 billion people, will not be relevant in Nauru, with its population of 10,000.

Yet governments share many features. They face similar responsibilities in that they need to establish a basic policy framework, provide critical goods and services, protect and administer the rule of law, and advance social equity. In executing these responsibilities, they need to perform a variety of similar tasks, such as organizing themselves to formulate and coordinate specific policies, and mobilizing human and financial resources to implement their decisions. They need to focus on core public tasks. They need proper incentives to perform these tasks as efficiently and effectively as possible in a responsive, transparent, and predictable fashion, and with clear strategic focus and appropriate participation. They need to confront corruption from the highest level.

The Bank's approach to helping its developing member countries (DMCs) improve governance practices, which was codified in the August 1995 Board paper, Governance: Sound Development Management, has sought to overcome problems of diversity by articulating a set of basic principles to be advanced in a wide variety of settings. This approach builds on the recommendations of the Bank's task force on improving project quality to ensure that Bank projects help build sustainable public sector capacity in DMCs.⁷ The July 1998 Board-approved Anticorruption Policy shows further deepening of the Bank's thinking in the governance area.

This chapter provides an overview of the Bank's thinking on good governance and capacity building, gives examples of how these ideas have been put to use in helping DMCs carry out governance reforms, and concludes with some thoughts on the next steps.

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